Fight Investment Fraud
Greco & Greco's lawyers represent investors to recover losses caused by securities fraud, churning, lack of suitability, negligence, sales of unregistered securities, unauthorized trading, and other misconduct by stock brokers, investment advisors, financial planners and their firms.
For a Free Attorney Consultation, call us at 877-821-5550 or
CMOs / CDOs
David Lerner Associates Fined by FINRA for sale of Apple Reits
As shown by this FINRA Order, FINRA sanctioned David Lerner and Associates for sales of Apple REIT Ten and markups related to municipal bonds and CMO’s. Of the $14 million in fines and restitution, approximately $12 million is to be paid to affected customers.
The wrongful conduct alleged by FINRA includes the following: 1) failure to do proper due diligence on Apple REIT Ten prior to approving its sale to customers, many of whom were elderly and unsophisticated, 2) misrepresentations of the REITs performance, value, and returns, 3) false statements in sales seminars and letters describing the REITs, 4) improper markups, and 5) supervisory violations.
David Lerner Associates has had a great incentive for the sale of the Apple REITs - it earns 10% on every sale and has sold $7 billion of the REITs since 1996. These revenues account for 60-70% of DLA’s business according to FINRA. As stated by FINRA: “Many of DLAs customers are senior and/or unsophisticated, and DLA solicits customers by general means such as the internet, radio, cold callings, mailings, and open-invitation seminars at senior centers, restaurants, and country clubs.”
Details of the restitution program may be found here. As stated, the remediation plan does not prevent investors from pursuing additional losses through arbitration. If you suffered losses in REITs and you would like to discuss your case for free with one of our attorneys, please contact Greco & Greco.
Posted by W. Scott Greco on 10/30/12.
Arbitration • Brokerage Firms • David Lerner Associates • CMOs / CDOs • FINRA • Fraud • REITs • Securities Fraud • State Regulators • New York • Suitability • Permalink
FINRA Fines Northern Trust for CMO Sales
FINRA recently fined Northern Trust Securities Inc. $600,000 for supervisory failures related to sales of Collateralized Mortgage Obligations (CMOs) to customers. As set out in this FINRA release: “from October 2006 through October 2009, Northern Trust failed to monitor customer accounts for potentially unsuitable levels of concentration in CMOs, in large part because it used an exception reporting system that failed to capture or analyze substantial portions of the firm?s business, including all CMO transactions, certain trades of 10,000 equity shares or more, and certain trades of 250 or more of fixed-income bonds.”
The Letter of Acceptance, Waiver, and Consent which can be found on the FINRA website discusses the risks of CMO’s and states that the flaw in the system was first raised in an arbitration filed by an investor who had almost 50% of her total liquid net worth invested in a Countrywide CMO that had lost significant value.
If you have incurred losses from CMOs which were unsuitable for you or were overconcentrated, or if you are the victim of other broker misconduct and you would like to discuss legal options with an attorney, please contact Greco & Greco for a free consultation with one of our lawyers.
Criminal Probe Initiated Regarding Auction Rate Securities Sales
According to this Wall Street Journal article, federal prosecutors in New York are investigating sales of auction rate securities by two former Credit Suisse brokers. According to the article, the investigation allegedly involves representations made that the auction rate securities were backed by student loans, when in fact they were actually backed by CDO’s (collateralized debt obligations). This appears to be the first reported criminal investigation related to Auction Rate Securities Sales.
If you are an investor stuck with Auction Rate Securities, and you would like a free consultation to discuss your legal options with an attorney, please contact Greco & Greco.
Auction Rate Securities Redemption Analysis
In this Barron’s article, the author sets out one of the more complete analyses we have seen regarding the various types of frozen Auction Rate Securities, and their likelihood (or unlikelihood) of being redeemed or sold in the future. The various types of ARS reviewed in the article include Municipal Issuers, Taxable Closed-End Funds, Municipal Closed-End Funds, Student Loans, and Collateralized Debt Obligations (CDO).
According to the article, the bleakest outlook is seen for the ARS backed by Student Loan Funds and CDOs which comprise about one-third of the ARS market ($105 billion of the $333 billion market). Only about $1 billion of the $85 billion in student loan ARS have been refinanced to date due to high refinancing costs and little incentive to refinance the comparatively low rates these ARS are paying.
The Collateralized Debt Obligation ARS are an even thornier issue. The Barron’s article states that the $20 billion in these ARS won’t be redeemed and that some may have invested in subprime mortgage securities. The chart at the end of the article estimates the market price of these securities at 50 cents on the dollar.
Many brokerage firms marketed and sold ARS to investors as safe, liquid alternatives to money market funds. If you are stuck with frozen ARS and you would like a free consultation to discuss your legal options with an attorney, please contact Greco & Greco.
New York subpoenas firms in mortgage fraud probe
Reuters has reported here that the state of New York has subpoenaed three large Wall Street banks (Merrill Lynch, Bear Stearns, and Deutsche Bank) pursuant to a probe related to the creation of mortgage-backed securities. The New York probe reportedly is looking into how mortgages were packaged together by Wall Street to create securities sold to investors and the banks’ relationship with credit-rating firms.
Merrill reduces value of assets linked to subprime mortgages
Merrill Lynch warned last week that it was reducing the value of certain securities linked to subprime mortgages, thereby reducing its third quarter profits. Reuters article.
CMOs and Mortgage Backed Securities
CMOs, or collateralized mortgage obligations, are bundles of mortgages which are then divided up for sale by investment banks. Different types of these mortgage backed securities can vary widely in risk for investors, but recent problems with the subprime mortgage lending market could portend future problems for individual investors who have been sold these types of securities without their brokers fully explaining the risks involved. As set out in the following linked news stories, customers of Brookstreet Securities and Wedbush Morgan Securities have filed arbitration claims against their brokerage firms related to the sale of CMOs and other mortgage securities.
Wall Street Journal article
Orange County Register Article
Most recent entries
- Prudential Fined for Failure to Supervise Fraudulent Withdrawals From Variable Annuity
- Washington DC Investment Advisor Dawn Bennett Barred by SEC
- Virginia Broker Andrew Corbman Suspended by FINRA
- Capitol Securities Censured and Fined for Reverse Convertible Notes and Other Conduct
- Investigation Regarding Randy Watts of Winchester, Virginia
- SEC and FINRA FINE UBS OVER PUERTO RICO BOND FUNDS
- Success of FINRA Arbitration Claims against UBS regarding Puerto Rico Bond Funds
- First FINRA Arbitration Award Against UBS of Puerto Rico Regarding Bond Funds
- H.D. Vest Charged With Failures Related to Supervision
- Norfolk Virginia Financial Advisor Charged with Fraud
- Vienna Virginia Financial Advisor Pleads Guilty to Defrauding Customers
- Virginia Regulators Require License Surrender and Fines over sale of 54 Freedom Products
- Brokers barred for stealing from elderly widow
- FINRA fines JP Turner for Leveraged and Inverse ETF sales
- State Securities Regulators release new list of top investor threats
- July 2016
- March 2016
- February 2016
- December 2015
- October 2015
- September 2015
- May 2015
- March 2015
- October 2014
- June 2014
- December 2013
- November 2013
- October 2013
- September 2013
- October 2012
- August 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- January 2011
- August 2010
- July 2010
- March 2010
- November 2009
- November 2008
- August 2008
- July 2008
- June 2008
- May 2008
- March 2008
- January 2008
- November 2007
- September 2007
- August 2007
- July 2007